With a clear regulatory framework in place, more European banks are planning to add digital assets in their product offerings.
According to CoinDesk, ING, a Netherlands-based firm, is planning to launch a euro-backed stablecoin. This initiative may involve a joint effort with other EU financial institutions and crypto firms.
Europe’s Markets in Crypto Assets regulations (MiCA) went into effect this year, establishing a framework for how digital assets can be exchanged in the EU. One aspect of MiCA is that stablecoin issuers in the region must obtain an authorization license.
Another rule requires stablecoin issuers to hold a substantial portion of their reserves in EU banks. This requirement was a dealbreaker for Tether, which chose to discontinue its euro-backed stablecoin ahead of MiCA’s launch, citing concerns that this concentration in EU banks could lead to “insolvency and fractional reserve risks.”
Alternatives to USD Stablecoins
In contrast, Circle has chosen to continue offering its EURC stablecoin while maintaining compliance with MiCA. However, the euro stablecoin’s market capitalization is nowhere near that of the company’s USDC dollar-backed product.
The growing dominance of USD stablecoins has raised concerns in the EU, as it increases the region’s dependence on foreign currencies and companies. For this reason, many have proposed that a digital euro—a central bank digital currency (CBDC) issued by the European Central Bank—would be essential to reduce the influence of USD stablecoins.
Two Disparate Worlds
While it may be some time before a digital euro hits the market, French financial institution Société Générale has already issued the first euro-backed stablecoin in the EU. Launched through its SG-Forge digital assets segment, EURCV began on the Ethereum blockchain and will expand to Solana this year.
It remains to be seen whether this stablecoin, along with the upcoming offering from ING et al., will be able to gain traction in a crowded stablecoin market.
However, these offerings are indicative of the continued merging of two previously disparate worlds. Just as EU banks are looking to add digital assets, Circle and other crypto companies have announced plans to pursue a bank charter in the U.S., which would make them full-service financial providers.
